Trust account rollout

Can project trust accounts be set up for contracts under $1M? What if a contractor has some projects under $1M and some over $1M?

No. Project trust accounts are not to be used for head contracts that don’t meet the contract price criteria (and all other criteria) for the relevant phase.

Contractors who only occasionally work on eligible contracts will have to use trust accounts for those contracts that are eligible. They will not have to (or be able to) use trust accounts for the contracts that don’t meet the contract price criteria.

Is profit for the head contractor included when working out contract price and whether project trust work represents more than 50% of the contract price?

The entire value of the contract (excluding GST) is assessed against the contract price eligibility criteria. If there is a portion of the head contract price that doesn't specifically relate to a type of project trust work (e.g., overheads), it is not included in the calculation of the value of project trust work but is included in the overall contract price.

Where a head contract is a standing offer arrangement, should all projects awarded under that standing offer use the same project trust account? Or does each separate order have its own project trust?

Generally, each separate purchase order is considered its own separate contract that will need to be assessed against the eligibility criteria. Project trust accounts cannot be used for multiple projects or reused for subsequent projects.

No. Retention trust accounts are only required where the related head contract requires a project trust account and where cash retentions are being withheld from a contracted party by a relevant contracting party (which will expand throughout the contract chain in phases).

Yes. A contracting party can have multiple retention trust accounts although the legislation only requires one retention trust account per contracting party. This account or accounts are to hold cash retention amounts across eligible projects. 

If a person is director for two companies and each of those companies withholds eligible cash retentions, does each company need a retention trust account, or can the person just have one for both their companies?

Each contracting party (in this case, each company) must have its own retention trust account. The account name for each retention trust account must include the name of that contracting party (trustee) and the word trust.

To work out if this exemption applies:

• start counting from the day the contract would become eligible if this exemption didn’t exist (the ‘trigger date’ - this is usually the date the first subcontract is entered into or the date the contract becomes eligible due to an amendment); and
• count the number of days until practical completion is expected to occur (using the practical completion date specified in the contract or, if not specified in the contract, a reasonable estimate).

If that period is less than 90 days, the contract will not require a project trust.

If, sometime later, there is a later contract amendment that is likely to affect the practical completion date, the head contractor will need to reassess whether the exemption still applies. If that amendment causes the expected practical completion date to change from less than 90 days to 90 days or more past the trigger date (and all other project trust criteria are met), a project trust will be required from the date of the amendment. Progress payments already made are unaffected. However, cash retention amounts already withheld will need to be transferred into a retention trust account.

For this exemption, maintenance work includes testing; taking samples (and restoring the sample site); work required on an ongoing basis to prevent deterioration, restore to correct operating specifications or replace a component at the end of its working life; but does not include certain building improvements/refurbishment/replacements. 

If maintenance work is the only type of project trust work to be carried out under a contract, a project trust is not required for the contract.

Subcontractors are generally not required to open a project trust account for paying their sub-subcontractors. However, if a subcontractor and their head contractor are 'related entities' and the head contract is eligible for a project trust, the subcontract will also require a project trust.

Project trust work does not include an 'authorised activity for a resource authority'. What this means is authorised activities permitted under a resource authority (e.g. a mining lease) are not included when calculating the value of project trust work.

If you are uncertain whether your contracted work (or which elements of the work) is for an authorised activity permitted under a resource authority, we recommend you seek independent advice.

State authorities include bodies established (by Queensland law or authority) for a public/state purpose (e.g. local government and university councils), government owned corporations, and hospital and health services. Contracts between the State and a state authority are exempt from project trust requirements. However, a state authority engaged by a private entity may require a project trust (if the contract meets the eligibility criteria).